Market Report.
🇺🇸 President Donald Trump unveiled the broad outline of a new trade agreement with the United Kingdom, the first such deal by the U.S. with a country whose imports were subject to new tariffs imposed by Trump in early April.
📈 The new deal include: retaining a 10% blanket tariff on U.K. imports while implementing a tiered structure for U.K. auto imports, wherein the first 100,000 vehicles annually face a 10% tariff, with additional units taxed at 25%. This agreement is projected to unlock a $5 billion export opportunity for U.S. farmers, ranchers, and producers, including $700 million in ethanol exports and $250 million in American beef and other agricultural goods.
🤝 The UK and US have agreed to improve industrial and agricultural market access, address procurement issues, streamline customs procedures, and protect intellectual property, labor rights, and environmental protections, while ensuring critical supply chains for US aerospace and pharmaceutical products.
🔧 It also requires the U.S. to negotiate an alternative to Section 232 tariffs on steel and aluminum, including forming a new trading union for these materials. This comprehensive agreement underscores a mutual effort to strengthen economic ties and drive innovation across industries.
❓ While Trump touted the deal as “full and comprehensive,” many specifics were unclear, and nothing was signed during the announcement. Some experts downplayed the impact, saying the path taken with the U.K. cannot easily be repeated with other nations where the U.S. has a large trade deficit. The announcement came as negotiations between the U.S. and U.K. were still ongoing, with the U.K. government suggesting talks were continuing at pace.
📉 Bank of England Governor Andrew Bailey told CNBC that the UK is facing more economic uncertainty, despite being the first country to strike a trade deal with the US under President Trump’s tariff regime: The tariff and trade situation has injected more uncertainty into the UK economy. The impact comes not just from the UK-US trade relationship, but also from the US’s trade relationships with the rest of the world.
🌍 While the UK-US trade deal is welcome, Bailey hopes it will be the first of many such agreements, as the UK is still looking at higher tariff levels overall compared to before.
🏦 The Bank of England cut interest rates by 0.25 percentage points, in a highly divided decision among the Monetary Policy Committee. This reflects the risks and uncertainties the central bank is grappling with. Bailey said the Bank sees risks of both weaker demand and more persistent inflation effects, making policy decisions challenging in the current environment.
🕰️ Now all that remains is to wait for Saturday’s meeting in Switzerland between China and the US to add optimism to the markets. President Trump expressed optimism about the upcoming trade negotiations between the U.S. and China this weekend: Trump said he expects there to be “substantive negotiations” between the two countries and predicted that the punitive 145% U.S. tariffs on China will likely come down. The president believes China very much wants to make a deal, and that China has more to gain than the U.S. in this sense. Trump believes the talks will be “substantive” and that China “has to” do something at this point given the high tariff levels.
🇪🇺 Yesterday, Trump adopted an accommodative stance towards Brussels during a news conference announcing the agreement with London, stating that “everyone wants to make a deal with the United States” and that he would want to meet with Ursula von der Leyen, calling the head of the Commission “fantastic”, despite the fact that the European Commission presented a list of possible countermeasures against US products if a trade agreement between the two sides is not reached.
💼 The U.S. Treasury Department announced it will establish a “fast-track” process to encourage greater investment in U.S. businesses from U.S. allies and partners. This comes after President Trump signed the “America First Investment Policy” memorandum in February to create the process and restrict China-affiliated people from investing in America’s strategic sectors.
📊 The fast-track process will include creating a “Known Investor” portal where the Committee on Foreign Investment in the U.S. (CFIUS) can collect information from foreign investors before an official filing is made. Treasury Secretary Scott Bessent stated the department is committed to maintaining an open investment environment while addressing national security risks that can accompany foreign investment. The fast-track initiative aims to facilitate greater inbound investment from trusted sources.
✝️ American Cardinal Robert Francis Prevost has made history by becoming the first United States-born Supreme Pontiff of the Roman Catholic Church. Taking the papal name Leo XIV, the 69-year-old pontiff is anticipated to forge positive diplomatic ties with Trump, notwithstanding his scholarly background and previous commitment to social justice initiatives.
🇷🇺 In the Russia’s 80th anniversary commemorations of the end of World War II, with leaders from over 20 countries attending, including Brazil’s President Lula, Xi Jinping and Vladimir Putin met. Putin and Xi stated that Russia and China have a “fully fledged partnership and strategic interests” that are not aimed against anyone. Xi said China would “resolutely defend” its interests as well as those of Russia and other developing countries. This is the first in-person meeting between Putin and Xi since the US-China trade war began, which has pulled the US away from global institutions. Key agenda items include the war in Ukraine, Russia-US relations, and economic/energy cooperation such as the proposed Power of Siberia 2 gas pipeline.
🇩🇪 The United States has decided to suspend intelligence-sharing with Germany until the far-right party Alternative for Germany (AfD) is treated as a legitimate opposition party. Meanwhile, Germany’s domestic intelligence agency, BfV, has paused labeling AfD as an extremist organization, awaiting a court ruling in Cologne on the party’s legal challenge. This temporary halt is seen as a partial victory for AfD, which argued the extremist classification undermined democracy. The extremist label would have allowed intensified surveillance of AfD, including recruiting informants and intercepting communications.
Market View:
💹 The trade agreement between the United States and the United Kingdom appears to be rather weak, although markets reacted positively in the United States.
📈 S&P 500 futures rose above 5,700 points but have fallen back in recent hours, standing below 5,700 for the time being and currently trading at 5,690 points. Nasdaq futures behaved similarly, temporarily exceeding 20,250 points, a target zone we have indicated in previous reports. However, they have also fallen back in recent hours and are patiently hovering below those levels, currently trading at 20,190 points.
💵 The dollar has strengthened in recent hours, with the DXY index approaching 101 points and retreating slightly from there to the current 100.50 points. This has caused the EUR/USD to lose the 1.12 level, in a clear decline from yesterday’s levels, when it stood above 1.13. At the moment, the pair is trying to recover some of the fall, standing at 1.1240.
📊 Futures in Europe, although less optimistic than in the United States, are also showing gains. DAX 40 futures are once again approaching historic highs, currently trading at 23,560 points. Eurostoxx 50 futures are also advancing, approaching 5,300 points and leaving behind the 5,250-point barrier.
🛢️ The oil market is once again showing zigzag movements. Yesterday, we commented on the sharp fall in crude oil during the session, but it has managed to recover. Brent crude is back above $63 a barrel.
🏅 Gold has continued to fall, possibly driven by positive news on trade agreements. In the last few hours, it fell below $3,300 per ounce, but has rebounded and is currently above $3,325.
💰 Bitcoin took off spectacularly during yesterday’s session, exceeding $104,000, although it subsequently fell back to its current level of $103,055.
